RACQ welcomes price monitoring report on cyclone reinsurance pool

In a statement, RACQ acknowledged the ACCC’s crucial role in ensuring consumers receive the full benefits of the pool. However, it raised concerns over insurance unaffordability remaining in northern Australia and the various challenges insurers need to overcome before joining the scheme.

“We also know the cyclone reinsurance pool – in its current form – will not achieve the stated policy objectives of fixing insurance affordability in the north,” said RACQ head of government relations and policy Vanessa Fabre. “On behalf of our 300,000 members who live in north Queensland, RACQ is committed to working with the federal government to help make the pool the best it can be.

“This report is another reminder that policy responses need to be well considered, designed, and implemented promptly given premiums continue to rise due to inflation and increasing levels of risk.”

The ACCC’s report found that insurance premiums in Northern Australia and other high-cyclone risk areas have increased more quickly than in the rest of the country over the past decade.

Last month, representatives from RACQ appeared at the Joint Select Committee on Northern Australia Inquiry public hearing to share their views on the cyclone reinsurance pool’s design and operation and how to improve it. They recommended four key changes:

Reconsider the budget-neutral principle and investigate opportunities for government subsidisation of the cyclone reinsurance pool or direct subsidisation to homeowners;
Expand the pool to cover all types of floods as it becomes a more frequent, high-risk, and significantly costly peril for Queensland and Australia;
Replace the “48-hour claims period” with a seven-day provision, aligning with commonly accepted definitions in current reinsurance contracts with the global market; and
Expand the pool to cover motor insurance because the exclusion of motor will add uncertainty, complexity, and cost to the system.

With Queensland facing extreme weather events often, RACQ called for the state to “receive its fair share” of the Australian federal government’s Disaster Ready Fund Bill. Now, the insurer is calling on the federal government to consider changes to the cyclone reinsurance pool’s design sooner rather than later.

“If the government is committed to this pool, then RACQ urges it to make the required changes so that it can deliver meaningful insurance premium relief for the people of northern Australia,” Fabre said.